Oil traders think it will go well under $50

The Nov NYMEX Crude Oil futures contract rose to $71.85 at the close on Friday after $69.85 the day before, but events are racing ahead. OPEC will hold its meeting early on Oct 24 and announce a cut of 1-2 million barrels per day, according to OPEC Pres Khelil. This sounds like disarray. Fear of production cuts took the oil price up substantially to $74 overnight and $73.86 at 11:10 am GMT.

ING says that if oil goes to $50 next year, the GDP of the Gulf Cooperation Council (including Saudi Arabia, United Arab Emirates, Kuwait, Oman, Qatar and Bahrain) would contract 25%. Bloomberg reports that put options on Dec NYMEX futures at $50 “soared 28- fold in the past two weeks,” meaning “Contracts that allow holders to sell 1,000 barrels of oil for $50 each by December closed at $280 on the Nymex on Oct. 17, up from $10 on Oct. 3.” This means some Oil traders think it will go well under $50. Deutsche Bank has a 2009 forecast of $60 on the possibility of a major world recession.

We may think that cheaper oil is a nice antidote to recessionary forces, but it’s also a disincentive to exploration and investment, not to mention investment in alternative energy.

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Barbara Rockefeller
Forex Trading Reports

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